Fully Digital Insurance: Are You Ready?

Commentators and practitioners are taking a larger, and longer look at digital InsurTech methods. Going beyond front end quotes, insurers and brokers are bringing in technologies to improve sales, service, and support. But this will require integration with back-office systems. Are we up for this?

Not a zero-sum game

Recently, InsurTechNews published a series of articles on insurance trends and the use of InsurTechs in various parts of the world. The last of these focussed on North America, with brief summaries of the other articles.Alexander Cherry, Head of Content at Insurance Nexus, authored the results, entitled New Sources of Growth in a Mature Insurance Market.

Cherry challenges the common wisdom that the middle-class, North American market segment is “relatively saturated, lacking the low-end market opportunities on offer in many parts of the world,… (T)he truth is that, in absolute terms, even ‘saturated’ markets are under-penetrated.”

Citing Matthew Josefowicz, Managing Director of the analyst firm Novarica,Cherry writes,“Insurers need to shift their orientation and look at the needs of individual market segments. Instead of starting with the risk, they need to start with the market.” (Emphasis mine.)

According to Cherry, the relationship between InsurTechs and insurers “is not a zero-sum game, given that it is happening in the context of an expanding addressable market.”

But this requires support that spans virtually all elements of communications and processing.

Making it work …

How does this apply in real life?Are we adding only ‘fluff’ coverages to attract minimal premiums?

The short answer is, ‘No.’There are insurers and brokers which are taking digitalseriously.As an example, Stephen Applebaum, Managing Partner at Insurance Solutions Group has been following interesting elements at Canadian-based Economical Insurance.

Economical is over 140 years old, and, until recently, relied exclusively on independent insurance brokers for distribution.That changed in 2016,when Economical introduced Sonnet, an Internet-only insurance underwriter. According to Applebaum, this allows Economical“to walk both sides of the street.”

This is a major shift. Virtually all of the Sonnet underwriting and policy service activity occurs through the Sonnet website.A note prominently posted on the Sonnet Website makes it clear:

We’re not your typical insurance company

At Sonnet, we believe that optimism is worth protecting. We offer customized coverage, in language you can understand, at a competitive price – and we do it all online. We’ve changed insurance for the better, so you can worry less and live more.

Ah, but the Filthy Lucre ..

Activity with other insurers suggest that digital insurance will provide consumers greater flexibility.But carriers also need to reduce friction points to provide faster service with reduced friction costs for the carrier.

Ludlow notes that insurers are looking at the front end of the business – customer acquisition.While this is important, Ludlow says, “What’s more appropriate, in my view, is a much broader view across all of the technology in an insurance company.”

This will include both front-end and back-end functionality, encompassing CRM, policy administration, billing, claims, and more. For mature organizations, this will encompass multiple technologies, many of which have never had to ‘play nice’ with other components.

However, the value is real.According to Ludlow,

“Digitizing the back end is the place where you will leverage all of the benefits of the front end, because you have to have the platform and the communication between all of those aspects in order to get the best benefit for the insurers and the customers,”

This is non-trivial.When asked how much work is required for the back end, Ludlow replied, “A lot.”

But Ludlow added that, if done consciously and on a modular basis, “you will find that the end solution will work seamlessly together.”

Where are you and where do you want to be?

This is big game hunting.It takes patience, focus, caution, and beaucoup d’argent.